Asia PE investment hits new high in 2021

A total of USD 342.9bn was deployed over the course of the year, USD 130bn more than the previous peak in 2017, according to preliminary data from AVCJ Research. It’s worth noting that Asia dealmaking crossed the USD 150bn threshold for the first time as recently as 2015.

Records were set in every major market in the region: Australia, China, India, Japan, South Korea, and Southeast Asia. In Australia, South Korea and Southeast Asia, investment in 2021 exceeded the combined totals for 2019 and 2020. Japan came close to emulating this feat.

China’s fourth-quarter resurgence came on the back of significant policy uncertainty. The technology sector was a notable target as Beijing sought to pin back companies that have arguably grown faster and further than the regulations intended to keep them in check.

Early and growth-stage investment in the sector recovered from a mid-year slump to USD 10.7bn, driven in part by a shift in focus from consumer-facing business models – which have been targeted most readily by regulators – to B2B-oriented deep-tech and hard-tech plays. Sustainability-related investment also remains strong, matching the record level set in the third quarter.

Activity was sufficient for China to reclaim its position as Asia’s tech investment hub. India surpassed its neighbour in the July-September period, but it slipped back to USD 9.1bn in October-December.

Across all sectors and strategies, private equity firms deployed USD 44.4bn in China between October and December. The two largest deals – in China and region-wide – were a USD 9.5bn restructuring of chipmaker Tsinghua Unigroup, featuring JAC Capital and Wise Road Capital, and a PAG-led USD 6bn commitment to shopping mall operator Wanda Commercial Management Group.

The regulatory upheaval effectively torpedoed IPOs by Chinese start-ups in the US from mid-year onwards and led to muted activity on the mainland and Hong Kong bourses. However, a frenetic first half – and a fourth-quarter spike in India as pre-profit technology companies made their mark on local exchanges – saw the proceeds from Asia PE-backed IPOs reach USD 75.9bn, another record.

Private equity exits recovered from a challenging 2020 to hit USD 107.1bn, the second-highest annual total after 2018. Sponsor-to-sponsor deals became increasingly prominent, accounting for 33% of proceeds, up from 21% in 2018. Meanwhile, the trade sale share fell from 66% to 55%.

In the fourth quarter of 2021 alone, sponsor-to-sponsor activity came to USD 17.8bn, roughly twice the total for the prior three months. Five of the 10 largest exits – including all the top three – saw assets passed from one private equity firm to another.

Fundraising remains challenging for most Asia-focused managers. Starting in 2015, capital committed to funds targeting the region has consistently exceeded USD 100bn. Last year’s total of USD 111.9bn is the lowest since that streak began.

LPs committed USD 29bn in the fourth quarter, up from USD 13.4bn in the third, helped by Baring Private Equity Asia accumulating USD 8.5bn for its latest pan-regional offering, which remains in the market. Fundraising was also spurred by signs of a revival in the renminbi-denominated space. China accounted for 12 of the 15 largest closes, of which eight were renminbi.

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• Topics
• Buyouts
• Expansion
• Greater China
• South Asia
• Southeast Asia
• North Asia
• Australasia
• Fundraising
• IPO
• Trade sale
• Asia
• China
• India
• TMT
• IPO